Nokia Recovering? Experts Fiercely Divided

By Sven Grundberg

Reuters

As Nokia shares gained considerable ground on Wednesday, after an encouraging batch of news including the surprise unveiling of the budget Lumia 620 smartphone and a deal in China, sell-side analysts are in fierce disagreement about the prospects of the loss-making Finnish company.

The split largely seems to depend on where the analysts are based. Out of the 10 Swedish, Finnish, Danish and Norwegian brokerages covering Nokia, only one has a “hold” rating, while the rest all rate the company “buy” or overweight, according to Factset. Not a single Nordic bank has a sell rating for Nokia. The average target price for Nokia among Nordic analysts is at €3.19, a healthy premium to the €2.75 level where Nokia is currently trading.

Conversely, an overwhelming majority of non-Nordic analysts are considerably more skeptical about Nokia’s prospects. Only three out of the 37 non-Nordic banks have buy or overweight ratings for Nokia. Meanwhile, 18 of the analysts in this group rate the company hold or neutral, and 16 banks having sell or underweight ratings. The average target price for Nokia among non-Nordic analysts is just €2.26, almost a euro lower than the average target price set by the Nordic banks.

The split between the Nordic and non-Nordic banks on how to view Nokia came into sharp focus after Microsoft Corp. Chief Executive Steve Ballmer said that sales of Windows-running smartphones have quadrupled from last year’s level during a meeting with Microsoft shareholders last week.

Sami Sarkamies, an analyst at the Swedish banking group Nordea, took note of the comments from Microsoft’s CEO and sent out a note to investors to inform them that he’d updated his forecasts for Lumia smartphone shipments. Nordea now expects Nokia to ship some 6 million Lumia smartphones in the fourth quarter, a million more than its previous estimate.

Mr. Sarkamies cited Mr. Ballmer’s comments about Windows Phone sales, as well as “positive early noise” related to the launch as reasons for his forecast upgrade.

Analysts from Denmark’s Jyske Bank, as well as Norway’s ABG Sundal Collier have also come out to praise what they perceive as an imminent comeback for the embattled Finnish handset maker.

ABG’s Per Lindberg, said he has seen witnessed plenty of “convincing evidence” that Nokia’s new products have gotten off to a good start. More importantly, Mr. Lindberg said early users “appear to be genuinely impressed and highly satisfied” with the Lumia 920 flagship device.

American and German analysts, on the other hand, took Mr. Ballmer’s comments with a grain of salt. On Wednesday Morgan Stanley analysts pointed out that the flagship Lumia phone was up against “a very low [sales] base last year, when Nokia was marketing its Lumia 800 in five countries, selling less than one million Lumias in the fourth quarter.”

Morgan Stanley added that its research identified intensifying competition in the low-end smartphone market, in places such as China and India, where high-spec Android smartphones are reaching increasingly lower price points.

And in a recent note, titled “Perception vs. Reality” Deutsche Bank 's Kai Korschelt agreed that people shouldn’t read too much into the recent talk about Nokia’s sales numbers.

“Our industry research indicates these initial stock-outs are caused by limited device supply, rather than overwhelming demand. Anecdotal evidence suggests that many stores have only received five to 20 devices per store with wider carrier distribution delayed in some countries such as Germany and the U.K.,” Mr. Korschelt said.

The German bank’s initial retail surveys in the U.K. suggest that Nokia took less than 10% market share in the first weeks after launching its new Lumia devices, Mr. Korschelt said, adding that this is lower than what it achieved with the Lumia 800 launch a year ago.

And on a global level, Deutsche noted that Google search interest appears to be only at levels similar to last year’s Lumia 800 launch.

Comments (5 of 13)

Ratings bank analysts are always to be taken with a grain of salt. Their recommendations only serve the interest of their own investing and trading agenda's. It is widely known that Deutsche bank is short on Nokia. One thing is completely wrong though. Google trends already shows twice as much as interest for the Lumia 920 as compared to the Lumia 800.

7:11 pm December 5, 2012

Will Smith wrote:

@Suman Gouda
Can Apple survive with only one phone (multiple iterations) with one OS? Huge fail on your point.

6:17 pm December 5, 2012

lost money wrote:

are they still divided? could some expert reply to me please! what a joke...the writer of this article needs to be fired! nokia is here to stay and apple is going down

5:19 pm December 5, 2012

lost money wrote:

are they still divided after this news? i have been saying Nokia is here to stay even this morning befor this run up....watch apple go down to below $500 and nokia shoot up to $10 within few weeks.....

5:16 pm December 5, 2012

Suman Gouda wrote:

How can Nokia compete in the market with just a couple of phones and that too restricted to WP only OS which is ugly to use and keep on being rejected by people ?

Nokia can manage to sell few million at throw-away prices, but it can't survive on WP only.

Can Microsoft depend on only one hardware company to sell its software (OS) ? Never. It will fail.

Similarly, how can Nokia with just one software partner succeed ? Any hardware manufacturer needs to have multiple software partners and offer all possible choices to customers.

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